Andrew Broadhurst, the freeholder (centre), in one of the flats with leaseholders John Dickie (left) and Fazle Syed, who is still paying back his £90,000 mortgage.
Photograph: Colin McPherson for the Guardian

Owners of flats in a Manchester complex which was marketed as an “outstanding” investment opportunity are facing huge losses after the fire brigade banned people from living there.

The first residents moved into New Lawrence House in 2009 but were forced to move out the week after the Grenfell Tower fire in 2017 after serious safety faults were identified.

According to allegations in a high court claim, the faults included missing balconies that meant french windows opened on a drop to the ground, a lack of fire-stopping to prevent the spread of smoke and flames, and inadequate smoke ventilation to escape stairs and lift lobbies. The claimants are seeking £16m in compensation.

Among the alleged breaches of building regulations at the property, which is now empty, was a steel structure that was not treated with flame retardant; fire engineers said this left the five-storey building vulnerable to collapse in the event of a blaze. Three of the lifts were missing, the roof decking was collapsing and balconies were not strong enough to support people, according to the claim, which details more than 200 faults.

“There were french windows but if you stepped out you would fall straight down,” said Fazle Syed, who bought a flat at New Lawrence House for his family. “I thought it was so bad that we decided not to live here. I paid £137,000 for this. It is disgusting. It is just devastating for my family. We have lost whatever we had and because there is a mortgage of £90,000 we are still paying that.”

The case is set to be tried next month and comes amid growing fears about standards of residential construction in recent years as developers sought to attract foreign investment in rising UK property markets.

Buyers on developments in Bradford, Leicester, Birmingham, Rotherham and Liverpool have engaged lawyers after buildings were defective or never built. Thousands of people could be affected, according to Martin Scott, a lawyer representing claimants.

The 103-apartment complex in Hulme was developed by JCS, a now defunct development company. It was signed off by Zurich Building Control, one of many private companies which since 1997 have been approved to carry out building regulation inspections on behalf of developers previously conducted only by public officials.

Three of the lifts were missing, the roof decking was collapsing and balconies were not strong enough to support people, the claim says. Photograph: Colin McPherson for the Guardian

Ministers said this week they were reconsidering the role of so-called approved inspectors amid concern at potential conflicts of interest between the regulator and the regulated.

Residents at New Lawrence House were finally forced out after the Grenfell disaster when Greater Manchester fire and rescue services issued a prohibition notice, citing the risk of fire spread and numerous “structural deficiencies”.

The freeholder and leaseholders of 30 apartments are now suing Zurich Building Control as well as Zurich Insurance, which provided a warranty for the building. They are also suing a company called East West Insurance to which Zurich Insurance this year sold its building warranty business. Zurich Building Control denies claims of fraudulent misrepresentation and East West denies breach of agreement.

John Dickie, who paid £100,000 for a flat for his family and is still paying a service charge and mortgage on it, described the situation as disgraceful. “They signed a final certificate when they knew it should never have been signed,” he said. “I am disgusted. My children were at risk.”

The claimants allege that Zurich Building Control issued certificates of compliance with building regulations even though its inspectors had noted inadequacies. The case alleges: “Buyers bought their flats on the basis of the building control certificates and their flats are now worthless.”

A spokesperson for Zurich said: “We believe our employees always acted in good faith and we will continue to strenuously refute any allegations of dishonesty or fraud.” It added that it sold its building guarantee business in March and that questions about policies should be handled by the new owner.

The flats were evacuated after the Grenfell Tower fire. Photograph: Colin McPherson for the Guardian

Problems with the apartments emerged soon after people moved in. They included concern that wooden staircases were the only means of escape in some of the blocks.

In early 2010, Greater Manchester fire and rescue service issued the first of several enforcement notices. It said JCS had not carried out a fire safety risk assessment as regulations required. In July 2012, it again issued a notice complaining of a lack of a fire risk assessment and said escape routes were obstructed. In June 2013, it issued an enforcement notice, finding the escape routes and exits were inadequate, citing a lack of ventilation for smoke and concerns about the ability of walls and doors to withstand fire. That same month, the building consultancy Arup produced a report for the freeholder that said the blocks should not be occupied.

Andrew Broadhurst, a chartered surveyor who bought the freehold in 2013, said: “The extent of the missing precautions here is verging on criminal. There were 300 people living here.”

A spokesperson for the former directors of JCS said: “At no point did Zurich Building Controls or Zurich Warranties give us cause for concern about safety or quality, at every stage of the project, sign off and approval was granted. At the time Zurich issued its warranty in 2010/11, the building, which had been inspected by structural surveyors, was fully compliant with all relevant regulations.”

East West Insurance denies that any agreement to rectify was entered into by it or Zurich and that it is disappointed that the case is going to court. “We remain committed to dealing with all warranty-holders fairly and in line with the terms and conditions of the warranties,” the company said in a statement.